Profile

Layout

Direction

Menu Style

India pivots, and pivots again

Wednesday, 08 February 2012 00:00

Hits: 1779

India faces a grave dilemma. It is the fourth-largest consumer of imported oil, and as a growing economy wedded to the carbon civilization, it needs to burn vast amounts of oil to maintain its growth rate.

The oil comes from a variety of sources, but mainly from the Gulf. The top five exporters of crude oil to India in 2011 in order of quantity were Saudi Arabia, Iran, Iraq, Nigeria and the United Arab Emirates. About 10% of India's imports of oil come from Iran.

Contradictory political pressures have put India's government in a serious bind.

As Subordinate ally to the United States
In the early 2000s, the United States wished to sequester India's respectable position within the Global South for its own parochial interests regarding Iran.

Knowing full well that it is energy dependent, India had begun to consider methods of bringing natural gas in from Iran's South Pars fields into Gujarat. Natural gas would be a sensible substitute for crude oil. There were two methods to draw the gas into the country. The first was to convert it into liquefied natural gas (LNG) and ship it to India. But this is an expensive proposition. The second was to run a pipeline from southern Iran through Pakistan into India. This Peace Pipeline would not only be a major boost for India's energy needs, but it would help create a material incentive for peace initiatives in South Asia.

To break the India-Iran ties, the George W Bush administration offered India a simple deal. It would remove sanctions against India that had come into place after India's nuclear tests of 1998. Unable to import certain technologies, India was eager to have these sanctions mitigated or withdrawn.

In exchange, the US would provide India with access to nuclear material from the Nuclear Suppliers Group, and so effectively recognize India as a nuclear power. This was despite the fact that the Indian government's own studies showed that nuclear power at best would only provide for 5% of India's energy needs and so not be a substitute for oil or natural gas.

In return, India would have to vote with the US against Iran in the International Atomic Energy Agency (IAEA).

India's bourgeois political parties went for the deal. In September 2005, India voted to find Iran in "non-compliance" with the safeguard obligations of the nuclear Non-Proliferation Treaty (NPT). What is remarkable here is that India is not a signatory to the NPT, yet it was able to judge Iran's actions based on it. This vote paved the way to move the Iranian case to the UN Security Council.

India voted in the IAEA once more in February 2006 to send the Iranian case to the Security Council. In December 2006, the US Congress ratified the US-India Peaceful Atomic Energy Cooperation Act. Its "Statement of Policy" noted pointedly that India was "to dissuade, isolate, and if necessary, sanction and contain Iran for its efforts to acquire weapons of mass destruction, including a nuclear weapons capability and the capability to enrich uranium or reprocess nuclear fuel and to the means to deliver weapons of mass destruction."

India yoked itself to the US agenda vis-a-vis Iran.

As partner with the Arab NATO and its silent ally
India is the second-largest trading partner of the Gulf Cooperation Council (GCC) countries. The GCC, the "Arab NATO", was formed in 1981 as a shield against Iran. It has a long antipathy to Iranian assertion in the region, and considers Iran to be its principle adversary (rather than Israel, for instance). Saudi Arabia is the primus inter pares of the GCC. It is the largest seller of crude oil to India (the GCC countries supply India with 45% of its crude oil needs). In 2006, the Indian and the Saudis signed a major deal. [1] While in India, King Abdullah and Indian Prime Minister Manmohan Singh urged Tehran to "remove regional and international doubts about its nuclear weapons program."

The silent ally of the Arab NATO is Israel. Regardless of its open declarations of support for the Palestinians, the GCC is reluctant to do anything to ruffle the feathers of Tel Aviv, which would of course irritate the GCC's main partner, the United States. This opened the door for a strengthening of the India-Israel ties that germinated up in the 1990s and have flourished in the past few years. India now imports over US$5 billion of Israeli arms, making India its largest arms customer. [2]

As leading figure in the BRICS formation
Since 2003, India has been a central player in the creation of a new international formation of the "locomotives of the South": first as India-Brazil-South Africa (IBSA, 2003) and then as Brazil-Russia-India-China-South Africa (BRICS, 2009). The BRICS bloc is a serious challenge to Atlantic hegemony, mainly on the economic plane but increasingly in the political domain as well. On Libya, the BRICS countries articulated a common platform but their challenge fell apart at UN Resolution 1973 (when South Africa voted for the resolution on the urging of President Obama). On Syria, Russia and China exercised their Security Council veto while the others voted for the resolution. Political unity is not yet on the cards. This is a major limitation of the BRICS platform.

On Iran, the BRICS are more cautious. There is no appetite for war, or even for a limited military strike. There is even less appreciation for the sanctions regime set up by the Atlantic powers. These economic sanctions do not run through the UN, which means they are not legally binding. The US has been trying to force those who trade with Iran to stop doing so on pain of being sanctioned by the US in turn. It is hard for the US to muscle the Chinese, who have the upper hand as far as economic transactions are concerned. US Treasury Secretary Timothy Geithner rushed off in mid-January to Beijing and Tokyo, eager to get these East Asian states to honor the punitive US sanctions regime. China is plainly not interested. It supports the UN resolutions against Iran, but refuses to adhere to the much more rigorous European and US sanctions regime. China buys a fifth of Iran's oil. It cannot afford to isolate the country. Nor can India and Japan. For them, their energy needs trump the parochial political imperatives of the Atlantic powers and the GCC.

When the US and the EU announced their new sanctions regime, the BRICS states took umbrage. The Chinese have already increased their purchases of African oil. India and China considered paying for the Iranian oil via gold rather than dollars. The Indians buy their oil via the Turkish bank, Halkbank, whose manager, Suleyman Aslan, pledged to continue its work with its customers. After hasty negotiations, the Indians and the Iranians agreed on February 7 to trade oil for a payment mechanism that includes Indian rupees (for 45% of the crude) and other methods for the remainder. Iran's banks will open accounts in India to settle payments. This might be a way around the US sanctions that now target Iran's central bank. India's Finance Minister Pranab Mukherjee was uncharacteristically bold in late January, "We will not decrease imports from Iran. Iran is an important country for India despite US and European sanctions on Iran."

India is in a political bind. Its ruling class favors a close assignation with the United States, but this is not a practical alliance. The US demands far too much, including the subordination of India's own interests to the US agenda. Close relations with China are imperative, as is the creation of a healthy foundation of communication in South Asia with Pakistan and Iran to build trust not only for these countries but also for Afghanistan, which is too often at the mercy of Indian, Iranian and Pakistani games.

Currently, the economic needs of China and India will trump any attempt to fully strangle Iran's economy. The attack on the rial has already had catastrophic effects for inflation inside Iran. But if oil exports cease, it will bring Iran's economy to a stop. India is not acting here out of the principles of non-alignment or for the creation of a South-led alternative to the Atlantic bloc. Nonetheless, India's objective interest is a sufficient spur to timidly cross swords with the parochial interests of the Atlantic powers, who seem to want to gallop to war with Iran.

Pressure on India is on, and so are the inducements to substitute Iranian oil with oil from Iraq and Libya. India's ambassador to the United States, Nirupama Rao, has been suggesting that Iranian exports to India have decreased over the past two years. This would mean that India might be open to a new entente, not to depart from the nuclear shadows this time but to be liberated by the United States from its oil dependence on Iran. This is not propitious for the consolidation of a BRICS bloc.